AMBAC executives refute layoff rumors after four leave bond insurer.

AMBAC Indemnity Corp. officials are moving to quash speculation that a major downsizing is imminent following the departure of four middle management officials in recent weeks.

"There are no plans or contemplation of downsizing," said Philip B. Lassiter. AMBAC's chairman, president, and chief executive officer.

However, rumors of forthcoming layoffs are circulating at the company, several sources said, fueled in part by20the recent departures of Charles Sandmel, first vice president in the general obligation/tax-backed group; Joan K. Jordan, manager of portfolio surveillance; Mitch Sekler, a first vice president in AMBAC Capital Management Inc.; and Judith Thorakis, manager of administration.

AMBAC officials would not discuss the circumstances of their departures. Jordan and Thorakis could not be reached for comment.

Repeated attempts to reach Sekler and Sandmel were unsuccessful.

Tom Perry, AMBAC's director of human resources, said the departures are "not connected to each other" and are the result of "individual circumstances" that he could not discuss.

The departures began about five weeks ago, when Jordan left the firm. Sekler left about three weeks ago, and Sandmel left on Aug. 26, Perry said. Thorakis, who is on vacation, has yet to officially leave the company, but will do so in the near future, Perry said.

The insurer will probably replace Sekler and Thorakis, Perry said, but he could not say whether it will be through promotion or a new hire. Nor could he confirm that each position would be filled.

"You're asking me to make a decision that hasn't been made," he said. This year, like most bond insurers, AMBAC has experienced a decline in both volume of issues insured and eamings from the heights of 1992 and 1993.

In the first half of 1994, the volume of insured bonds slipped to 37% from the

same period in 1993 to $36.4 billion from $58 billion, as overall issuance fell at about the same pace.

AMBAC's activity in the new4ssue tax-exempt market was down 26% over the period, to $9.5 billion in the first half of 1994 from $16.3 billion in the same period 1993.

AMBAC had net income of $73.2 million, or $2.08 per share. in the first half of the year, down 17.7% from $89.1 million, or $2.53 per share, in the first half of 1994.

But after enjoying record-setting profitability in 1992 and 1993 thanks to a boom in new and refunding issuance, bond insurers were anticipating a slowdown this year.

Refundings, in particular, fueled rapid earnings growth for the insurance industry in the last two years, thanks to the unique way they are treated in an Insurer's balance sheet.

Insurers receive an up-front premium from issuers when they guarantee a bond issue, but then write down the premium over the life of the bond. When a bond is refunded prior to maturity, the so-called "unearned premium" goes directly to the Insurer's bottom line.

Overall refunding volume dropped more than 65% in the first half of this year, to $27.2 billion from $78 billion in the first six months of 1993, according to Securities Data Co.

AMBAC, which has 230 full-time employees, is widely regarded as one of the leanest operations in the bond insurance sector.

A report released today from Fitch Investors Service said that AMBAC and Municipal Bond Investors Assurance Corp. rank as the "most efficient insurers," with the lowest fiveyear averages in terms of both net expense ratio and gross par expense ratio.

The net expense ratio measures the portion of each premium dollar an insurer holds for policyholder protection, while the gross par expense ratio compares expenses to business volume without taking reinsurance agreements into account, the report said.

And both rating agency and equity analysts said they have not heard of plans for major layoffs at AMBAC and would be surprised if that were the case.

"One reason the bond insurers were So [profitable] was they were able to pump out all these deals when the boom hit without adding staff," said one rating agency official.

The official, who asked not to be identified, added that although volume is off significantly this year, the insurers are still profitable thanks to the unique way premiums are as-- sumed over the life of a transaction.

In fact, AMBAC's core earnings, which exclude the effects of refunding activity, were $63.4 million in the first half of the year, up 23% from $51.4 million in the first half of 1993.

"I would be surprised at a major layoff," said an equity analyst who follows AMBAC. "It's not like these companies have bloated cost structures. Their fixed expenses have .grown at a relatively slow rate. This is not a company that's hurting."

Still, rumors about pending layoffs have plagued the large municipal bond insurer, executives at the firm say.

"The rumors were swirling internally months ago," said one firm executive.

Perry for his part said he has met with several of the firm's employees concerned about the security of their jobs, but insists that the rumors of layoffs have no basis in fact.